ECB Trichet: Anticipate Satisfactory Troika Review For Greece

BASEL, Switzerland (MNI) – Inspectors from the International
Monetary Fund, European Commission and European Central Bank will
probably arrive at a favorable assessment of Greece’s progress toward
meeting its fiscal targets, ECB President Jean-Claude Trichet said
Monday.

Trichet, speaking for the last time in his capacity as spokesman
for the Global Economy Meeting of central bankers held at the Bank for
International Settlements, said that participants here confirmed the
slowdown of growth worldwide but did not see an outright recession.

He reiterated that central banks and in particular the ECB are
ready to provide banks with any needed liquidity, but he suggested that
joint action on interest rates was unlikely given divergent
circumstances.

He declined to comment on media reports that the German government
no longer categorically rejects a Greek sovereign default, noting that
“there have been several voices which were not saying exactly the same
thing.”

“My understanding is that all Europeans including the executive
branch of Germany…are calling on the Greek government to fully deliver
on its commitment,” Trichet said, adding that these calls were being
made “with great firmness” given that honest fulfillment of the program
was in Greece’s own interest and would leave the economy and people “in
a better position than [under] any other assumption.”

Trichet said that in view of this “very strong message” being
conveyed to Greece and because it is to that country’s own benefit, his
“working assumption” was that “we will be able to observe something
which is satisfactory” when the troika returns to complete its review.
“But again, I have no other comment on that. We will see when the time
comes.”

The slowdown of the global economy currently being observed is “not
particularly new, of course,” Trichet said, noting that it had already
been reflected in many of the projections recently issued by the world’s
various financial institutions.

“We don’t see a recession, but we see a slowing down in comparison
with what had been observed,” he elaborated, adding that “downside risks
…have augmented during the recent period.”

Despite the slowdown in emerging markets, there are still some
inflationary pressures there, Trichet said. “In the advanced economies,
the situation would more be…a situation where you have a solid
anchoring of medium-term inflation expectations.”

Asked whether deflation might pose a threat to the major economies,
he replied: “I don’t see that we could really say that the advance
economies as a whole are going to a level of inflation which would be
zero or close to zero. I don’t really see that.”

Still, he said, central banks are strongly united in their view
that keeping expectations well moored is necessary for “appropriate
growth and job creation in the medium to long term,” but also in light
of monetary authorities’ price stability mandate.

Such anchoring “means guarding against the danger of inflation and
guarding of course against deflation,” he said. “I would say that from
that standpoint the situation has to be examined at the level of each
particular economy and they are obviously in different situations.”

Trichet repeated the theme of heterogeneous circumstances when
asked whether global central banks might cooperate on the interest rate
front, though he highlighted again the “very, very intimate, permanent
relationship” of central banks with each other.

Central banks did make clear at today’s meeting that “we stand
ready to provide liquidity to banks as required,” Trichet reported. “It
is again a sentiment that we all expressed. In the case of the euro area
you know that we have the capacity as a central bank to provide
liquidity on an unlimited basis and at fixed rate, which is a very
important feature of our non-standard measures.”

Governments that “have an issue of confidence because they are not
sufficiently convincing as regards their medium-term fiscal policy have
to take extremely seriously this fiscal policy issue in order to regain
control of the medium-term evolution and inspire confidence to their own
economic agents, households, enterprises, savers and investors,” he
said.

Decisions taken by governments, including those agreed on by
Eurozone authorities on July 21, should be implemented “as rapidly, as
comprehensively, as completely as is required by the situation,” he
stressed.

Trichet also said that the Swiss National Bank gave the meeting
“some explanation of the reason why” it had decided to set a maximum
exchange rate for the franc versus the euro, which was met by
“understanding by the Global Economy Meeting,” Trichet said.

Trichet said that the ECB had “a great level of credibility that we
will preserve in all circumstances.”

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